Wheelock Properties (S) Ltd - Fret Not! Opportunities Still Await

Cash-rich balance sheet.

Track record in high-end DP is a boon.

36% discount to RNAV.

In-line set of 4Q17 results

Wheelock Properties' (Singapore) (“WPS”) FY17 revenue was down 30.7% y-o-y to S$533.7m or 99% of our forecast, mainly due to lower sales at The Panorama and Ardmore Three – both developments have been completely sold since June and Nov 2017, respectively.

FY17 gross profit was nonetheless up 12.6% at S$127.7m due to better margins. Net profit almost doubled from FY16 to S$115.2m in FY17 or 95% of our forecast, mainly due to a S$55.7m fair value loss on WPS’s investment properties in FY16.

Stripping out fair value changes on investment properties, FY17 net profit would have increased 2% y-o-y to S$116.1m. A first and final dividend of 6 S cents was declared, which translates to an FY17 dividend yield of 3.2% against yesterday’s closing price of S$1.87.

Dwindling pipeline…

As at 31 Dec 2017, Scotts Square is 89% sold (301 out of 338 units), with marketing on-going.

In China, about 99% (781 of the 784 units) launched in Phase 1 and 2A of the Fuyang project (Yong Jing Shan or 雍景山) have been sold, with handover of duplexes and townhouses of Phase 2A in progress. The construction of the remaining highrise apartments for Yong Jing Shan is expected to complete this year.

Overall occupancy for Wheelock Place and Scotts Square Retail was 95% and 98%, respectively.

But strong capacity to pursue new projects

Going forward, we look forward to stable contributions from the group’s investment properties. While future contributions from the development property segment will be affected by the rapidly dwindling pipeline of projects, WPS’s cash rich balance sheet offers it the opportunity to pursue other development projects locally and abroad.

Net cash on the books stood at S$766.2m as at end-FY17, or S$0.64 per ordinary share. In addition, we believe the group’s track record in high-end/luxury development projects will allow it to take advantage of the cyclical environment in both Singapore and China.

With a change in covering analyst, our fair value increases slightly from S$2.27 to S$2.34. Against yesterday’s closing price of S$1.87, Wheelock is trading at a 36% discount to our fair value. Maintain BUY.

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